Akst: ‘Fiscal cliff’ plans fall short

Published: Friday, Dec. 14, 2012 5:30 a.m.CDT

I’m in a bind because I want to address the “fiscal cliff.” I thought politicians were merely grandstanding since President Obama’s re-election, and that eventually a fair compromise would emerge. Now I’m not so sure.

The bind I mentioned is twofold.

One, because of this newspaper’s profanity policy, writing how I really feel about the fiscal cliff is likely to be edited out.

Two, although the Mayan calendar showing the end of the world next week has supposedly been debunked, I’m not convinced. I might be sweating this column instead of buying a new Ferrari (red with tan leather seats) on credit.

I know, cry you a river. OK, here’s what I think about the fiscal cliff:

When corporate profits are historic; when one percent of the wealthiest people own as much as 40 percent of the nation’s wealth; when the economy is continuing to recover (albeit haltingly); when we just squandered $6 billion on an election; and when the results of that election show that Americans are a) sick of obstruction, b) think it’s fair to ask the rich to pay a bit more, and c) feel that people with the least shouldn’t be bashed any further, the Republican position is insupportable. It’s mean. Cold. Wrongheaded. Treasonous.

Also, the Business Roundtable (a group of the nation’s leading CEOs) on Tuesday publicly dropped its opposition to tax increases.

In forming these thoughts, I found an op-ed by Richard D. Wolff published this week. Wolff is an economics professor who has taught at Yale, the Sorbonne and the University of Massachusetts-Amherst.

His take on the economy – which has the virtue of fairness – is that both Republican and Democratic plans are doomed and will cause repeated, cyclical financial crises.

In presenting Republican/conservative economic ideals as “Plan A” and Democratic/liberal ideals as “Plan B” – which has the virtue of simplicity – Wolff argues that both mindsets are inadequate.

“Plan A, has the government do little or nothing,” he writes. “Corporations and the rich mostly prefer it. They believe government intervention to be counterproductive and unnecessary because private capitalism best heals itself.” Problems will self-correct in a short time and with minimal pain.

Self-correction occurs in two phases. Phase I is when downturns result in falling sales, prices, wages and unemployment, “reinforcing one another in a recessionary spiral,” Wolff writes.
Then, capitalists capitalize on hard times by investing, thus changing losses to profits. Government shouldn’t interfere because that worsens deficits and increases “dependent” populations living off government “gifts.” We’re supposed to ride the storm out.

Except, as he cheerfully notes, “downward spirals persist, credit markets freeze and collapse looms,” so power people abandon Plan A.

With Plan B, monetary authorities (the Federal Reserve and other central banks) rescue the financial industry with huge loans, loan guarantees and other assistance to unfreeze credit. It also directly “stimulates” the economy with tax cuts and government spending increases.

“Plan B’s fiscal policy expands the demand for goods and services and thereby jobs and incomes. The goal is to stop economic decline and stimulate an upturn,” Wolff writes.

It can also allocate money to “offset the suffering from unemployment, home foreclosures, etc. Business and political leaders hope that may at least slow mounting opposition to capitalism provoked by its severe convulsions.”

The problem with both plans? Both are based on “confidence in, and reaffirmation of, the capitalist system. It does not change who owns and runs private enterprises. It does not change the basic pattern of rewards, incentives and strategies of private businesses.”

• Jason Akst teaches journalism and public relations at Northern Illinois University. Contact him at jasondakst@gmail.com.

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